Crypto Industry Backlash to California Billionaire Tax – Crypto News

A proposed 5% tax on billionaires’ wealth in California has drawn a strong response from crypto executives, who argue it would trigger an exodus of entrepreneurs and capital flight, and would be wasted anyway.

The ballot initiative, known as the 2026 Billionaire Tax Act, proposes a 5% tax on net wealth above $1 billion to help fund the health care system and state assistance programs, according to the SEIU United Healthcare Workers West union.

As the proposed wealth tax is partly assessed against unrealized gains, some billionaires may need to sell stock or parts of their businesses to raise funds to pay the tax, which would either be payable in one installment, or over five years with interest payments.

Senior figures in the crypto industry, including Bitwise CEO Hunter Horsley and Kraken co-founder Jesse Powell, argue that the measure would only result in billionaires leaving the state, with a negative overall effect.

“I promise you this will be the final straw. Billionaires will take with them all of their spending, hobbies, philanthropy and jobs. Solve the waste/fraud issue,” Powell said in an X post on Sunday.

Related: Most crypto treasuries ‘will disappear’ amid bleak 2026 outlook: Execs

One of the key defenders of the proposals is US Representative Ro Khanna, a crypto-friendly Democrat from California’s 17th Congressional District. He has made the case for the tax in a series of X posts, arguing that it will fund better childcare, housing, and education, which, in turn, will be good for American innovation.

Tax measure could result in capital flight

Castle Island Ventures founding partner Nic Carter and ProCap BTC chief investment officer Jeff Park also speculated that the tax would prompt billionaires to move all their capital out of the state.

“I generally like Ro and have interacted with some of staff who have always been fantastic, but I do wonder — have they done an analysis of capital mobility in response to wealth taxes?” Carter said on Sunday. 

“It seems to me that capital is more mobile than ever, and one time wealth taxes are a signal to capital — like a sovereign default — that more can be expected in the future,” he added.

Wealth taxes don’t always work

Fredrik Haga, the co-founder and CEO of on-chain data platform Dune, argued that Norway had tried a similar tax and that it resulted in a mass exodus of the wealthy from the Nordic country, and raised less money than expected.